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2017 U.S. Direct Response Outlook: The Ever-Changing TV Ecosystem

By Rebecca Barr, Executive Vice President

‘Tis the season . . . oh wait, that was last month. Now is the time of abandoned New Year’s resolutions and also that time of year when we talk about all that is going on in the media marketplace — the anticipated potholes in the road, so to speak.

The insane political cycle is in the rearview mirror (well, the political spending is; the political insanity, not so much) and there are really no major marketplace disruptions to speak of. After 2016, I would love to tell you that there is nothing but smooth sailing ahead, but alas, no rest for the wicked.

The Evolution

Even without major events or distractions, the TV ecosystem continues to change in ways that challenge brands and media buyers alike. We have talked in the past about cord fraying/cutting and the threat to TV advertisers. The way people consume and interact with video content is constantly evolving.

Netflix and Hulu stormed the castle in a major way a few years back with their successful forays into original series which drop a whole season at a time — perfect for the instant gratification that comes with binge-watching an entire season on a lazy Saturday afternoon. They succeeded in introducing new ways to access and consume programming. This type of viewing takes people away from linear TV viewing and often away from their TVs altogether. Or does it?

In recent years, the use of OTT (over the top) boxes like Apple TV and Roku have brought viewers back to the sofa with their ability to deliver streaming programming to the living room TV. Comcast has taken that a step further when late in 2016 they rolled-out their integrated partnership with Netflix to their X1 boxes. This advancement is not one which will magically bring all of the cord-cutters back but it may slow the erosion of paid cable somewhat.

Digital Overtakes TV Spending

2017 is projected to be the year that linear TV ad spend is bypassed by big, bad digital. While the growth of digital is undeniable, no digital alternative can yet offer the mass reach of TV.

Nielsen shows that the upper end of the demographic universe has remained steady consumers of linear TV while those 65+ have actually increased their consumption slightly. Gen X/Y have cut back nearly 25% in the last 5 years while Millennials have declined significantly (>40%).

While traditional TV viewing is eroding, there are still significant hours spent with the medium and significant opportunity to reach your target. In additional to using TV as the engine behind an integrated media strategy, you will also want to beef-up your targeting with tools like utilizing addressable platforms. On the surface, addressable seems expensive but when you consider you are cutting-out the wasted impressions it becomes much easier to justify.

Programmatic TV . . .

In the eternal words of Judge Elihu Smails, “well . . . we’re waiting!” Programmatic is still, as they say, in development. The hype over programmatic TV in the past two years has been nearly deafening but for all of the dialogue and the “race-to-the-moon” like atmosphere, it is not likely that it will ever fully evolve in the way digital programmatic has evolved. There are technological roadblocks on the TV side for starters and a whole host of other snags that will continually drag on the utopian vision (Better data! One marketplace! Streamlined workflow!) of programmatic TV.

What has developed is the rise of data-based advertising products which marry first and third-party data and allow for better targeting of linear inventory. These products are currently offered by big networks like NBCUniversal, Viacom and Turner, and smart money says more and more networks will follow suit in 2017. This fulfills part one of the programmatic dream but the bigger part — the central marketplace part — is still well off in the distance due primarily to the aforementioned technological barriers.

Depending on how streaming video shakes-out in the next few years, a likely scenario for making that marketplace a reality could be that TV content delivery makes a dramatic shift to OTT which would bridge the tech gap. Stay tuned (pun intended).

Now What?

All great changes are preceded by chaos. – Deepak Chopra

Long story short, buckle-up and get used to change. Embrace it. Once upon a time, direct marketers were the only ones that considered ROI on a daily basis. In the digital age, data is the new currency and all marketing has become performance-based.